Taxpayer Rating System

The determination of the taxpayer rating is carried out according to specific criteria in several sequential selection steps using the exclusion method, i.e., companies included in any of the rating classes are no longer evaluated in subsequent selection steps. A company can receive one of five such rating evaluations.

J – newly registered taxpayer

• Companies registered no earlier than 6 months before the rating determination date

The risks identified for these companies are not taken into account in determining the rating, however the company can familiarize itself with the existing risks that may affect the taxpayer rating in the future in the “Indicators” Taxpayer Rating section of their EDS profile.

• Companies registered after the rating determination date

For these companies, the rating determination date will be the company's registration date. No risk assessment is carried out, and detailed information about the taxpayer rating is not available in the EDS.

N - inactive taxpayer

Companies that do not engage in active economic activities according to the data available to the SRS. In the SRS assessment, these are the companies whose total declared tax amount for the last six months, as stated in the submitted declarations and reports, does not exceed EUR 750 and meet at least one of the following criteria groups:

• Companies are excluded from the SRS's VAT payer register due to not conducting economic activities.
• Companies meet all the following criteria at once:
  • no declared work income.
  • tax payments to the state budget have not been made, or their total amount does not exceed EUR 150.
  • The total value of transactions declared in VAT returns for the assessed period does not exceed EUR 750 (for members of VAT groups, the total amount of declared transactions for supplies of goods and services domestically and within the territory of the European Union (EU), as well as export transactions is assessed).

The information available to the SRS regarding the economic activity of these companies is also evaluated, which should result in tax obligations according to the SRS. These companies can familiarize themselves with it in their profile in the EDS Taxpayer Rating section “Indicators” ® “Tax Declaration Risk Assessment”.

Other risks identified for these companies are not taken into account in the rating determination.

C – Compliance violations

• Companies for which the SRS has decided to suspend their economic activity.
• Companies that have been excluded by the SRS from the SRS’s VAT payer register due to violations detected in the field of tax compliance and whose registration in the SRS’s VAT payer register has not been renewed.

Although other risks identified for these companies are not taken into account in determining the rating, the company can review them in their profile in the EDS Taxpayer Rating section "Indicators".

B – Compliance needs to be improved.

Companies that do not meet the J, N or C rating criteria and have tax compliance risks in one of the areas assessed by the SRS.

• Companies that have one or more significant risks in the field of tax compliance:
  • there is a tax debt that exceeds EUR 150 at the end of the previous month and the ratio of the tax debt to the tax contributions made indicates the risks of non-payment of the tax debt.
  • at least one of the risks in the salary payment assessment has been identified:
    
    The information about employees who have not received wages in a specific month, such as those on extended leave, is not used in calculating the company's average wages and salaries.
    • Comparison of the wage and salary level:
      • the average wages and salaries are less than or equal to the amount of the minimum monthly wage specified by the state.
      • the average wages and salaries do not reach the amount of the minimum monthly wage specified in the general agreement document for the construction sector.
      • average wages and salaries are less than or equal to 50% of the average monthly wages and salaries in the respective sector and region (compared to the CSB data on the average monthly gross wages and salaries by type of activity in regions for the fourth quarter of 2023:
        https://data.stat.gov.lv/pxweb/lv/OSP_PUB/START__EMP__DS__DSV/DSV051c).
    • non-declaration of employees and wages and salaries:
      • economic activity is carried out (the total transaction value is declared in the taxpayer's VAT declarations), but the mandatory state social insurance contributions are not declared in employer’s reports.
      • no employer reports have been submitted or employees with income have not been declared in the employer's reports, although:
        • employees worked at the construction site (data from the Unified Electronic Working Time Record Database).
        • employees carried out passenger commercial transport with a passenger car or taxi (data from the website or mobile app service providers).
        • at the employer’s request, at least three foreigners have been granted the right to employment (data from the Office of Citizenship and Migration Affairs).
  • at least one of the VAT risks used in determining the rating has been identified:
    • after the transaction is completed, counterparties are excluded from the SRS’s VAT register at the initiative of the SRS – such transactions are deemed as transactions with risky counterparties who have been found to commit tax violations.
    • the declared amount of VAT payable to the budget indicates potential VAT losses - the nature of the transactions declared in the taxpayer's VAT declarations suggests that the taxpayer's transactions are mostly carried out within the territory of Latvia, but as a result, the amount of VAT payable to the budget is minimal.
    • the amounts of declared EU acquisitions and EU supplies indicate potential VAT losses - the largest share of transactions declared by the taxpayer in the VAT declaration consists of intra-EU acquisitions and deliveries to EU member states, which may indicate the provision of potential intermediary functions to taxpayers from other EU member states involved in the chain of transactions.
  • no more than two tax returns and/or reports have been filed.
  • no annual report for the last fiscal year has been submitted.
  • no declared bank accounts.
  • the initiated process of exclusion from the SRS’s VAT register was interrupted more than twice.
  • the transfer of the company has been established.
  • as a result of the tax audit and/or tax inspection or tax inspection in the customs field, the calculated additional tax amount exceeds the company's state budget tax payments.
  • as a result of tax inspection or other measures for the administration of taxes, administrative penalties have been imposed for established significant violations in the field of taxation or customs.
  • average wages and salaries do not reach 25% of the average wages and salaries in the country’s private sector (compared to the CSB data on the average monthly gross wages and salaries in the country in the fourth quarter of 2023: https://data.stat.gov.lv/pxweb/lv/OSP_PUB/START__EMP__DS__DSV/DSV010c)
  • a decision has been made regarding the imposition of a fine for non-submission of transfer pricing documentation.
  • the company or its official is subject to international or national sanctions.
  • the status of Authorized Economic Operator (AEO) in customs has been revoked due to the identified violations.
  • other risks identified for the company or official not mentioned above.

The company can review the identified risks, as well as more detailed information, such as the period for which the risk is assessed, in their EDS profile in the Taxpayer Rating section "Indicators".

• Companies that have declared bankruptcy.

Other risks identified for these companies are not taken into account in the rating determination. The company can review the identified risks in their EDS profile in the Taxpayer Rating section “Indicators”.

A – Good compliance.

Companies that have good tax compliance, without significant risks in tax compliance, and that do not meet the criteria for ratings B, C, N and J.

The company can review the identified relatively insignificant risks in their EDS profile in the Taxpayer Rating section "Indicators".

It should be noted that the SRS may also have other risk information about the taxpayer at its disposal, including information characterizing a separate indicator, the disclosure of which to the taxpayer is prohibited for the SRS by national and international regulatory enactments, but it is not used to determine the publicly available rating assessment and does not affect the taxpayer's rating.

It should be taken into account that the SRS will continue to use this information in tax administration measures for all taxpayers, regardless of the overall assessment of the taxpayer's rating.

The exact information about the time period of data and information used to determine the specific indicator for its rating can be viewed by the company in their EDS profile.

Indicators that characterize the existence of a fact are evaluated as of the rating determination date.

Indicators that assess the company's performance in fulfilling tax obligations are evaluated for a certain period of time – from 2 months to 3 years.

s of the date of determining the rating,  indicators such as tax debt status, compliance with extension deadlines, facts related to suspended economic activities according to the decision of the State Revenue Service, facts related to insolvency proceedings, information on applicable sanctions for the company or its officials, etc, are evaluated.

For the period of:

• two months – assesses whether the company has made a decision on non-contentious recovery, whether a decision has been made on the voluntary execution of overdue tax payments.
• three months – assesses the VAT risks used to determine the rating, evaluates the level of wages and salaries against national and regional averages, evaluates third-party data on non-declaration of employees and wages.
• six months – assesses the fact of submission of declarations and reports and delays in the deadline for submission, analyzes the information provided in the taxpayer's declarations and reports, evaluates the calculated tax amounts declared in the declarations and reports for payment to the state budget, and assesses tax contributions made to the state budget.
• 12 months - assesses the tax debt recovery operations carried out by the SRS, the amount of administrative fines imposed for violations detected in the field of taxes and customs, the amount of taxes and customs payments calculated in addition to payment to the budget as a result of tax and customs administration measures, the information received from the State Labour Inspectorate regarding detected cases of illegal employment, etc.
• 36 months – assesses information on the actions of the company's officials in the field of compliance with tax obligations and exclusion of the company from the SRS’s VAT register.